Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Address to the Institute of Chartered Accountants Luncheon Club



Download PDFDownload PDF

Deputy Leader of the Opposition

COMMONWEALTH

PARLIAM ENTARY LIBRARY micah

ADDRESS TO THE INSTITUTE OF CHARTERED ACCOUNTANTS

LUNCHEON CLUB

THE HON ANDREW PEACOCK MP

DEPUTY LEADER OF THE OPPOSITION

SHADOW TREASURER

12.30 PM, THURSDAY 17 NOVEMBER 1988

NOAHS HOTEL, 186 EXHIBITION STREET

MELBOURNE

Parliament H ouse, Canberra, A.C.T. 2600

ON TUESDAY, THE SECRETARY OF THE TREASURY,

MR BERNIE FRASER, IS REPORTED TO HAVE SAID THAT "PEOPLE

SHOULD NOT GET TOO WORRIED IF THE OUTCOMES FALL A LITTLE

SHORT OF FORECASTS, PROVIDED THERE IS A CLEAR MOVEMENT IN

THE RIGHT DIRECTION."

BUT THE POINT IS THAT WE ARE NOT SEEING A CLEAR

MOVEMENT IN THE RIGHT DIRECTION ON TWO OF THE TREASURER'S

KEY ECONOMIC FORECASTS.

ON INFLATION, THE CPI FOR THE SEPTEMBER QUARTER

SHOWED A CLEAR MOVEMENT IN THE WRONG DIRECTION. THE RATE OF

INFLATION ACCELERATED.

ON THE CURRENT ACCOUNT DEFICIT, THE FIGURE OF

$1.7 BILLION FOR OCTOBER - THE SECOND LARGEST IN AUSTRALIA'S

HISTORY - MAKES IT VIRTUALLY IMPOSSIBLE FOR THE BUDGET

FORECAST OF $9.5 BILLION IN 1988-89 TO BE ACHIEVED. INDEED,

THE $681 MILLION TRADE DEFICIT IN OCTOBER WAS THE LARGEST ON

RECORD. IMPORTS GREW BY A MASSIVE 18 PER CENT MAINLY DUE TO

INCREASES IN THE CONSUMPTION AND OTHER GOODS CATEGORIES,

WHILE EXPORTS WERE ALMOST UNCHANGED. THIS FOLLOWS A

SIGNIFICANT DETERIORATION IN THE UNDERLYING CURRENT ACCOUNT

DEFICIT LAST YEAR.

CLEARLY, PEOPLE HAVE A RIGHT TO BE WORRIED.

SINCE THE LAST FEDERAL ELECTION, THE GOVERNMENT HAS

DELIVERED TWO BUDGETS AND ONE MAY ECONOMIC STATEMENT.

2

u ' ϊ

ON EACH OCCASION, IT HAS MISSED THE OPPORTUNITY TO

REDUCE THE TAX BURDEN, BASED ON REDUCED GOVERNMENT SPENDING,

AND TO IMPLEMENT THE NECESSARY MICROECONOMIC REFORMS,

INCLUDING FREEING UP THE LABOUR MARKET AND PRIVATISATION.

THE GOVERNMENT HAS CLEARLY MISSED THE OPPORTUNITY TO MOVE IN

THE RIGHT DIRECTION.

THE INADEQUATE SETTING OF FISCAL AND WAGES

POLICIES HAS FORCED THE GOVERNMENT TO RELY UNDULY ON

MONETARY POLICY TO CURB DOMESTIC DEMAND AND, THEREFORE, THE

DEMAND FOR IMPORTS.

AS A RESULT, THE GOVERNMENT DOES NOT HAVE THE

FREEDOM TO CONDUCT MONETARY POLICY WITH THE LONGER-TERM GOAL

OF GRADUALLY REDUCING THE INFLATION RATE AND, HENCE,

ACHIEVING A SUSTAINABLE REDUCTION IN INTEREST RATES.

THE GOVERNMENT'S ECONOMIC POLICIES ARE FAILING TO

STRENGTHEN OUR BALANCE OF PAYMENTS AND IMPROVE OUR LIVING

STANDARDS.

LABOR'S HIGH TAXING REGIME HAS TAKEN ITS TOLL,

PARTICULARLY ON LOW TO MIDDLE INCOME EARNERS.

FOR EXAMPLE, A FAMILY ON AVERAGE WEEKLY EARNINGS

WITH A DEPENDENT SPOUSE AND TWO CHILDREN WOULD NEED AN EXTRA

$56 A WEEK IN JULY 1989 TO RESTORE REAL HOUSEHOLD DISPOSABLE

INCOME TO ITS LEVEL AT MARCH 1983, WHEN LABOR WAS FIRST

ELECTED

MANY AUSTRALIAN FAMILIES HAVE SUFFERED DECLINES IN

THEIR TAKE-HOME PAY AND, HENCE, LIVING STANDARDS. HIGH

TAXES HAVE REDUCED THE INCENTIVE, AND THE OPPORTUNITY, TO

INVEST AND TO'wORK.

MOREOVER, LABOR'S TAX 'REFORMS' HAVE CONSOLIDATED

THE BIAS IN THE TAX SYSTEM AGAINST SAVINGS AND INVESTMENT,

WHICH HAS LEFT OUR LABOUR FORCE TO WORK WITH OUTMODED AND

ARCHAIC EQUIPMENT, THUS CONTRIBUTING TO OUR POOR

PRODUCTIVITY PERFORMANCE.

ON TOP OF LABOR'S RECORD TAX TAKE, HIGH INTEREST

RATES HAVE ERODED THE STANDARD OF LIVING OF FAMILIES

STRUGGLING TO BUY THEIR FIRST HOME, AND DISRUPTED THE

EXPANSION AND INVESTMENT OF BUSINESSES, BOTH SMALL AND

LARGE.

THE BOTTOM LINE IS THAT LABOR CANNOT DELIVER THE

NECESSARY ECONOMIC POLICIES TO STRENGTHEN OUR BALANCE OF

PAYMENTS AND IMPROVE LIVING STANDARDS.

THE COALITION HAS CONSISTENTLY ARGUED FOR TAX CUTS

FUNDED PRIMARILY BY REDUCTIONS IN GOVERNMENT SPENDING TO

STRENGTHEN OUR BALANCE OF PAYMENTS AND IMPROVE OUR LIVING

STANDARDS.

REDUCTIONS IN GOVERNMENT SPENDING RELEASE RESOURCES

TO THE PRIVATE SECTOR, INCLUDING OUR VITALLY IMPORTANT

EXPORT AND IMPORT-COMPETING INDUSTRIES. LOWER TAX RATES

WE HAVE REPEATEDLY EMPHASISED THE NEED TO RAISE

PRODUCTIVITY TO IMPROVE OUR INTERNATIONAL COMPETITIVENESS

AND OUR LIVING STANDARDS.

LOW PRODUCTIVITY MEANS LOW REAL WAGES AND A LOW

STANDARD OF LIVING.

LOW PRODUCTIVITY ALSO MEANS HIGH COSTS AND,

THEREFORE, AN EROSION OF OUR INTERNATIONAL COMPETITIVENESS.

THERE IS ENORMOUS SCOPE FOR PRODUCTIVITY

IMPROVEMENTS IN AUSTRALIA, PARTICULARLY IN THOSE INDUSTRIES

WHICH HAVE BEEN SHELTERED FROM THE SPUR OF COMPETITION

EITHER THROUGH PROTECTION OR REGULATIONS.

THESE POTENTIAL PRODUCTIVITY GAINS COULD BE

REALISED IF THE GOVERNMENT WERE TO DELIVER GENUINE

MICROECONOMIC REFORM - THE SUPPOSED HALLMARK OF THE HAWKE

GOVERNMENT'S THIRD TERM IN OFFICE.

BUT THE CURRENT CONFUSION WITHIN LABOR'S RANKS OVER

COASTAL SHIPPING INDICATES NOT ONLY THE GOVERNMENT'S

UNWILLINGNESS TO TACKLE THE PROBLEMS IN THAT INDUSTRY, BUT,

MORE FUNDAMENTALLY, IT IS SYMPTOMATIC OF LABOR'S INABILITY

TO DELIVER ON MICROECONOMIC REFORM IN GENERAL.

RESTORE THE INCENTIVE TO WORK AND TO INVEST.

ON LABOUR PRODUCTIVITY, AUSTRALIA HAS AN ABYSMAL

RECORD. ACCORDING TO THE BUDGET FORECASTS, LABOUR

PRODUCTIVITY IS ESTIMATED TO GROW BY ONLY 0.75 PER CENT IN

1988-89. AND, ACCORDING TO THE LATEST OECD STATISTICS,

LABOUR PRODUCTIVITY GROWTH IN AUSTRALIA IS EXPECTED TO

AVERAGE 0.7 PER CENT PER YEAR IN THE PERIOD 1986 TO 1989,

COMPARED TO AN AVERAGE RATE OF 1.4 PER CENT IN THE OECD.

REFORM OF THE LABOUR MARKET IS CLEARLY LONG OVERDUE

BUT THIS GOVERNMENT LACKS THE WILL AND THE POLITICAL COURAGE

TO TAKE IT ON. ONLY LAST WEEK, ACTU SECRETARY BILL KELTY IS

REPORTED TO HAVE EXCLUDED ANY NEGOTIATIONS ON WORKING TIME

FROM THE CURRENT AWARD RESTRUCTURING.

CLEARLY SUCH ACTIONS LIMIT CONSIDERABLY THE GAINS

TO BE HAD FROM THE PROCESS OF AWARD RESTRUCTURING AND

COMPROMISE ANY EFFORT TO IMPROVE THE COMPETITIVENESS OF

AUSTRALIAN INDUSTRY.

THE COALITION'S INDUSTRIAL RELATIONS POLICY PERMITS

EMPLOYEES AND EMPLOYERS TO DETERMINE THEIR OWN WAGES AND

WORK CONDITIONS AT THE ENTERPRISE LEVEL.

THE RECENT 'CASTLE BACON' DECISION BY THE

ARBITRATION COMMISSION IS AN EXCELLENT ILLUSTRATION OF THE

BENEFITS OF DIRECT DEALING BETWEEN EMPLOYERS AND EMPLOYEES

AT THE ENTERPRISE LEVEL.

OVERALL, THE COALITION'S POLICY PROVIDES FOR

SIGNIFICANT IMPROVEMENTS IN PRODUCTIVITY TO THE BENEFIT OF

BOTH EMPLOYEES AND EMPLOYERS.

THE GOVERNMENT BUSINESS SECTOR IS ANOTHER AREA OF

FERTILE GROUND FOR PRODUCTIVITY GAINS.

AUSTRALIA HAS ONE OF THE LARGEST GOVERNMENT

BUSINESS ENTERPRISE SECTORS IN THE OECD.

THE NET RATE OF RETURN IN THESE ENTERPRISES WAS A

DISMAL 2.7 PER CENT IN 1986-87, COMPARED TO 14.2 PER CENT

FOR THE PRIVATE SECTOR.

CLEARLY, IMPROVEMENTS IN THE EFFICIENCY OF THESE

ENTERPRISES WOULD YIELD SUBSTANTIAL GAINS.

THE COALITION'S COMPREHENSIVE PROGRAM FOR THE

PRIVATISATION AND DEREGULATION OF MANY GOVERNMENT BUSINESS

ENTERPRISES OFFERS SUBSTANTIAL GAINS IN EFFICIENCY AND

PRODUCTIVITY.

DESPITE SENATOR WALSH'S ATTEMPT TO RE-OPEN THE

DEBATE WITHIN THE GOVERNMENT, IT IS CLEAR THAT THE

RESISTANCE FROM THE LEFT AND THE TRADE UNION LEADERSHIP

CANNOT BE OVERCOME, AS SHOWN BY THE DEBACLE AT LABOR'S

CONFERENCE IN HOBART.

IN SHORT, THE GOVERNMENT CANNOT DELIVER ON

PRIVATISATION.

AND IT NOW APPEARS THAT GENUINE REFORM OF COASTAL

SHIPPING IS ALSO OFF THE AGENDA.

THE AUSTRALIAN COASTAL SHIPPING INDUSTRY IS BESET

WITH INEFFICIENCIES, RESTRICTIVE WORK PRACTICES AND RELATED

HIGH COSTS.

THERE ARE SOME GLARING EXAMPLES. FOR INSTANCE, IT

COSTS MORE TO SHIP A CAR FROM MELBOURNE TO NEW ZEALAND

ACROSS THE TASMAN THAN IT DOES FROM MELBOURNE TO NEW ZEALAND

VIA JAPAN. AND AUSTRALIAN SEAMEN ARE ENTITLED TO 0.932

FULLY PAID DAYS LEAVE FOR EACH DAY WORKED, COMPARED TO 0.592

FOR THE UNITED STATES, 0.247 FOR JAPAN AND 0.23 FOR THE

UNITED KINGDOM. ·

BUT IT LOOKS AS THOUGH THE POSSIBILITY FOR A

SIGNIFICANT IMPROVEMENT IN THIS INDUSTRY MAY FALL PREY TO

THE CONTINUING TENSIONS BETWEEN THE PRIME MINISTER AND

MR KEATING.

CONFUSION ON THE REFORM OF COASTAL SHIPPING

REIGNS WITHIN THE GOVERNMENT. ESTABLISHING YET ANOTHER

TASKFORCE ON COASTAL SHIPPING, THE MINISTER FOR TRANSPORT

AND COMMUNICATIONS, MR WILLIS, DID NOT SPECIFICALLY ASK FOR

THE OPTION OF FOREIGN COMPETITION TO BE INCLUDED IN THE

REVIEW.

IF IT ELIMINATES ONE OF THE MAJOR OPTIONS TO

IMPROVE EFFICIENCY IN AUSTRALIA'S COASTAL SHIPPING INDUSTRY

- FOREIGN COMPETITION - LABOR WILL EFFECTIVELY REDUCE THE

POTENTIAL FOR SIGNIFICANT PRODUCTIVITY GAINS.

SUCH CONFUSION DOES NOT AUGUR WELL FOR THE

ACHIEVEMENT OF SUBSTANTIAL PRODUCTIVITY IMPROVEMENTS IN THIS

OR ANY OTHER HEAVILY REGULATED INDUSTRY.

AND ON THE WATERFRONT, THE GOVERNMENT HAS SHOWN

LITTLE SIGN OF ACTION.

ACCORDING TO SOME ESTIMATES PREPARED FOR THE

BUSINESS COUNCIL OF AUSTRALIA, IT MIGHT BE CHEAPER TO BUY

OFF THE EXISTING WATERFRONT WORKFORCE AND START AFRESH

RATHER THAN CONDUCT NEVER-ENDING INQUIRIES AND PROTRACTED

NEGOTIATIONS WITH THE UNIONS.

LABOR CLEARLY CANNOT DELIVER ON LABOUR MARKET

REFORM, ON PRIVATISATION AND ON REFORM OF COASTAL SHIPPING

AND THE WATERFRONT. BUT THE ONE THING THAT IT CAN DELIVER

ON IS HIGHER TAXES. MR KEATING HAS TAKEN CARE OF THAT.

IN CONTRAST, THE COALITION'S ECONOMIC POLICIES WILL

BOTH STRENGTHEN THE BALANCE OF PAYMENTS AND IMPROVE LIVING

STANDARDS.

WE WILL REDUCE GOVERNMENT SPENDING AND WE WILL

REDUCE TAXES AND DELIVER A BUDGET SURPLUS.

WE NEED THE BUDGET SURPLUS TO RETIRE SOME OF THE

PUBLIC DEBT, INSTEAD OF PASSING IT ONTO FUTURE GENERATIONS,

AND, WE NEED A SURPLUS FOR RESPONSIBLE MACROECONOMIC

MANAGEMENT.

WE HAVE A DETAILED PROGRAM FOR THE PRIVATISATION OF

MANY GOVERNMENT BUSINESS ENTERPRISES.

WE HAVE AN INDUSTRIAL RELATIONS POLICY TO REFORM

THE LABOUR MARKET.

WE WILL TACKLE THE INEFFICIENCIES IN COASTAL

SHIPPING AND ON THE WATERFRONT HEAD ON.

IN SHORT, OUR ECONOMIC POLICIES, BY FREEING-UP THE

LABOUR MARKET AND INTRODUCING COMPETITION INTO OTHER KEY

AREAS OF THE ECONOMY THROUGH PRIVATISATION AND MICROECONOMIC

REFORM, PROVIDE A BASIS FOR A SUSTAINABLE IMPROVEMENT IN

PRODUCTIVITY AND, HENCE, IN OUR INTERNATIONAL

COMPETITIVENESS AND IN LIVING STANDARDS.

IMPROVED COMPETITIVENESS PLUS SMALLER GOVERNMENT

AND LOWER TAXES PROVIDE THE BASIS FOR US TO TRADE OUR WAY

OUT OF OUR HUGE FOREIGN DEBT.